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Everybody does it. "Schwab earned 1.4% of revenue from payment for order flow, TD Ameritrade about 8.4%, and E*TRADE about 6.1%. Interactive Brokers has histo
by basch 6y ago
Everybody does it.
"Schwab earned 1.4% of revenue from payment for order flow, TD Ameritrade about 8.4%, and E*TRADE about 6.1%. Interactive Brokers has historically been quite reticent about participating in internalization, because it doesn’t play well with their sophisticated clients; they earn about 1.1% from it."
Scroll down to "payment for order flow"
https://www.kalzumeus.com/2019/6/26/how-brokerages-make-money/ https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...
Schwab sells theirs as a feature/benefit. https://www.schwab.com/public/schwab/active_trader/trading_tools/execution_quality https://www.schwab.com/public/schwab/active_trader/trading_t...
- jariel 6y agoThanks for that, from your reference: "Why Robinhood earns more than the discount brokerages for order flow is readily apparent: their product encourages options trading. This is bad for customers, principally because the supermajority of Robinhood customers do not understand options trading and the risk/reward calculus for them is even more borked than it is for the vast majority of people who engage in it. The options trades they engage in are also less liquid, and so have higher spreads, and so are more lucrative for marketmakers, "